Walker's woes 04/26/01

Ever since it became painfully clear that the River Park Square parking garage would struggle mightily -- even teeter on the brink of insolvency -- people have wondered how the garage's reality could lag so far behind the expectations it was stamped with by Walker Parking Consultants of Indianapolis. Now the answers to some of those questions are coming into clearer focus, as new documents produced by Walker to the city have been revealed in a motion filed by Mayor John Powers' special counsel Laurel Siddoway in Superior Court earlier this week.

That the information is coming out now underlines the city's aggressive approach to the legal battle it is waging against Walker and the developers of the River Park Square mall, Spokane's Cowles family. The Walker documentation is included in a motion related to which documents should and shouldn't be considered secret in the ongoing discovery phase of the city's lawsuit. Typically, information like that provided by Walker might be saved for later in the proceedings. Including it at this time may be aimed at putting more pressure on the developer to come to the bargaining table even more than it is aimed at the judge ruling on the motion.

Along with providing a detailed timeline (see sidebar), the documents Walker has released appear to answer some key questions. Critics of the garage have long argued that Walker's analysis was no analysis at all, but simply a ratification of the developers' financial vision for the garage. Early in 1996, this appears to have been the case, as handwritten notes made by Walker read, "What does rate need to be in order for project to work?" Within weeks of those notes being written, Walker provided R.W. Robideaux and Co., the mall's property manager, with a report that showed $22.2 million in construction costs could be shouldered by the garage if the hourly rate was set at $1.40 per hour -- a significant increase over previous analyses.

This appears to be a strange way of providing advice. Rather than arriving at an unbiased answer about what amount of debt the proposed garage could support, Walker appears to have been given the answer and then been told to make the question fit it. While this may be a suspicious business practice, it becomes potentially illegal when a city and bondholders come to rely financially on that methodology as independent and valid.

As for that question of who Walker really worked for, the city or the developer, Walker's own records suggest a conflict of interest was afoot. The city doesn't appear to have been notified that not only was Walker running new numbers for Bob Robideaux, principal of R.W. Robideaux, before the city joined the project in Jan., 1997, but that he was also seeking Walker's advice after the city joined the project but before the bonds were actually sold. Robideaux's reasons for plugging in new variables to test parking usage theories, and who, if anyone, instructed him to do so, may be only known through the deposition phase of the litigation. But it appears he had some concerns that the high numbers the city bought into were not realistic. Three different times in 1997, Robideaux had Walker run different numbers than those the city adopted in January of that year, but the city never saw those new scenarios, which were all lower than what Walker had previously provided.

Perhaps more significantly, when Walker was engaged -- by the developers -- to update their 1996 numbers for the 1998 sale of the bonds, it failed to disclose the other scenarios it had run in the intervening months. If there was concern that the garage wouldn't reach its expectations, perhaps based in the confusion over what kind of validation program would work best, then the developers or Walker could have simply stopped and said they made a mistake before the sale of the bonds. This would have had a big impact on the project, however, as the $26-million sale price of the garage was linked directly to Walker's more inflated findings. In other words, if Walker had admitted its trepidation, less money would have gone into the project -- if the project survived at all. But failure to meet expectations was exactly what was in store for the garage, and the Walker correspondence seems to push the central issue of this controversy even more into the realm of fact: The city agreed to too high a price for the garage.

So Walker seems to have opened itself up to some liability in this release of documents. But that, of course, is ultimately up to the courts to decide. Walker has professional insurance to cover mistakes like this one appears to be, but it's unlikely they have enough to cover what the city may claim in damages (a figure that could approach $40 million). As a result, Walker is probably in more of a settling mood than the developers appear to be at the moment. But in the process of discovery, Walker may make life more difficult for their former client. In the city's subpoena of documents, it asked Walker who it relied upon for information in its study of the River Park Square parking garage project. Walker named just one individual: Bob Robideaux.

None of this information would be coming out right now if it weren't for a dispute over secrecy between the developers' attorneys and the city. While going through the routine of discovery, Witherspoon Kelley, the Cowles family's counsel, sought to quash the city's subpoena sent to the Compass Group, an investment fund that made the construction loan to the project. Then Witherspoon Kelley made a motion to keep the developers' own records sealed. The motion filed by the city this week aims to keep the developers' records open, with some exceptions (as in leases of disinterested mall tenants).

There's no small amount of irony in Witherspoon Kelley arguing to seal documents crucial to understanding a public-private partnership. Witherspoon Kelley has a distinguished record as an advocate of opening information up for public consumption. On behalf of The Spokesman-Review, the newspaper owned by the Cowles family, Witherspoon Kelley has prevailed in many cases involving many of the same issues present here -- but they were arguing from the other side.

So why seek to keep the Compass Group's records from the public? (Sealed records can be seen by the attorneys involved on both sides, but they must be kept in a separate, sealed record, making for onerous documentation.) For one thing, the Compass Group would have a pretty accurate picture of how much was actually spent on the renovation and expansion of the garage. Critics have long argued that much less was spent on the project than the City Council was led to believe, leaving the remainder of the money to go to the mall project, the private side of the deal that public money is not supposed to fund.

As for the developers' own internal documents, the city is likely anticipating they will connect the dots even further in the big picture of what really happened. In light of the new revelations about Walker, documents could certainly shed light on why different, less lofty scenarios were run through Walker not only before the city adopted the plan but also after. Who wanted to see those numbers? How seriously did they take them -- in other words, was there genuine concern on the part of the developers that the projections sold to the City Council would never come to pass?

Powers and Siddoway were clearly hoping that their last act, filing a revised lawsuit against the developers and Walker in February, would bring the parties to the negotiating table. Powers has always claimed that he favors a fair settlement over protracted, expensive litigation. But negotiations haven't materialized, which means the litigation continues, with more discovery and depositions on the horizon.

Who is involved in that litigation may change, however. Until now, the bondholders have stayed on the sidelines, but as time goes by, the likelihood of that group joining the fray increases. In the city's calculation, that turns up the heat even more, again hopefully prompting negotiations. But once the legal cat is out of the bag, it can be hard to get back under control, so the escalation of releasing the Walker documentation to the public via the courts could serve to only inflame the issue even more.